- interest rates

[A500leroy]

https://www.bbc.co.uk/news/business-54314971

Does this mean i need to empty my savings account quickly?

[glazbagun]

I can understand how sub zero interest rates would increase spending, but would it not also create some kind of dystopian asset boom, making current house prices seem thoroughly reasonable?

[bitchstewie]

In real terms you're already losing money due to inflation with cash in the bank.

The dilemma is how much to hold as cash and what to do with it if not in the bank.

[JagLover]

leaving aside the economic justifications (which are very poor IMO)

Sub Zero interest rates are also a massive FU to anyone trying to be responsible and paying for things with money saved and trying to provide a reserve should they fall on hard times.

They show a morally bankrupt establishment.

[rxe]

Unlikely to be pushed down to retail accounts - you’ll just get zero, assuming you’ve got less than some threshold with a bank.

[mike74]

JagLover said:

leaving aside the economic justifications (which are very poor IMO)

Sub Zero interest rates are also a massive FU to anyone trying to be responsible and paying for things with money saved and trying to provide a reserve should they fall on hard times.

They show a morally bankrupt establishment.

I think all of that has been proven beyond doubt to be the case already without needing to venture into NIRP territory.

Not only a morally bankrupt establishment but also an actually bankrupt economy.

[menousername]

Does it really stimulate spending? Is the evidence not that it adds to deflationary pressures as people hoard more due to uncertainty.

Couple of assets may inflate more due to borrowing but given where we are borrowing terms appear to be tightening already

Is the guy behind the curve? Or is this more wealth transfer? Or just nobody knows what to do but believe they should do something/anything?!

[egor110]

Didn't Japan have negative interest rates ?

[Welshbeef]

egor110 said:

Didn't Japan have negative interest rates ?

But not for retail customers

[Red 4]

Welshbeef said:

egor110 said:

Didn't Japan have negative interest rates ?

But not for retail customers

How would any financial institution provide a negative rate to its customers ?

This is about the interest banks receive on deposits at the Bank of England. The lower the rate, the less attractive it is (especially if they are, in effect, being charged for the privilege).

It's designed to encourage banks to lend, not to give you a 0% loan.

[bitchstewie]

Red 4 said:

How would any financial institution provide a negative rate to its customers ?

I assumed it was as simple as they charge you for holding your money.

[A500leroy]

bhstewie said:

I assumed it was as simple as they charge you for holding your money.

So we all need to do a northern rock and empty our accounts?

[Red 4]

bhstewie said:

Red 4 said:

How would any financial institution provide a negative rate to its customers ?

I assumed it was as simple as they charge you for holding your money.

No, it isn't about that (although I suppose there is nothing stopping them if they wanted to lose customers).

If everyone withdrew their deposits and stuck it under their mattress then where would the banks get their capital from ?

[DanL]

A500leroy said:

bhstewie said:

I assumed it was as simple as they charge you for holding your money.

So we all need to do a northern rock and empty our accounts?

No. It’s unlikely that negative rates will hit retail deposit accounts, but there’s no need to get your money until / unless they do...

[anonymous-user]

Or you could have the perfect government utopia of negative rates on retail accounts and a cashless society as is being pushed for.

Then you are stuffed

[bitchstewie]

Red 4 said:

No, it isn't about that (although I suppose there is nothing stopping them if they wanted to lose customers).

If everyone withdrew their deposits and stuck it under their mattress then where would the banks get their capital from ?

No idea on that one but I'm pretty sure that in Switzerland you literally pay if you hold cash as I remember reading it some time back and thinking "why would anyone do that?".

[voyds9]

Well if I can't increase my money in the bank then I don't need to work as many hours.

[Whoozit]

glazbagun said:

I can understand how sub zero interest rates would increase spending, but would it not also create some kind of dystopian asset boom, making current house prices seem thoroughly reasonable?

It's been happening for 12 years. And not just house prices, every asset class imaginable. Which is not great for society.

[egomeister]

DanL said:

A500leroy said:

bhstewie said:

I assumed it was as simple as they charge you for holding your money.

So we all need to do a northern rock and empty our accounts?

No. It’s unlikely that negative rates will hit retail deposit accounts, but there’s no need to get your money until / unless they do...

If it gets to that stage there will likely be limits on withdrawals and/or penalties for doing so, in which case it would be prudent to position beforehand...

[DanL]

egomeister said:

DanL said:

A500leroy said:

bhstewie said:

I assumed it was as simple as they charge you for holding your money.

So we all need to do a northern rock and empty our accounts?

No. It’s unlikely that negative rates will hit retail deposit accounts, but there’s no need to get your money until / unless they do...

If it gets to that stage there will likely be limits on withdrawals and/or penalties for doing so, in which case it would be prudent to position beforehand...

Unless all banks introduce negative rates to retail customers at the same time (and equally), in my view it’s unlikely they’ll pass any negative rate burden on to the end consumer. It’s a surefire way to lose customers - banks clearly don’t want this to happen, so they’re incentivised to absorb the costs.